bac stress testing results_final

8/14/2019 BAC Stress Testing Results_final

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Bank of AmericaImplications of Supervisory Capital Assessment

Dr. Walter MasseyChairman of the Board of Directors

Ken LewisChief Executive Officer and President

Joe PriceChief Financial Officer May 7, 2009


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I mportant P resentation Format I nformation

Adverse scenario estimates represent a hypothetical what ifscenario that involves an economic outcome that is more

adverse than expected. Estimates provided herein by the Federal Reserve or Bank ofAmerica are not to be considered forecasts of expected lossesor revenues.

We undertake no obligation to update any information to reflectfuture discussions with our regulators on this or other topics.


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Supervisory Capital Assessment P rogram(SCAP)

Regulatory capital standards

Stress test methodology

SCAP assumptions and findings

BAC current capital levels

Capital planning implications of SCAP


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Supervisory Capital Assessment P rogram(SCAP)

Federal Reserve well capitalized standard for Tier 1 capital ratio remains at 6%

Bank of America well above standard with $171 billion or 10.09% at 3/31/09

At this level Bank of America is $69 billion above the well capitalized standard

For purposes of this assessment, the Federal Reserve established a 4% Tier 1 commonratio guideline at the end of 2010

Bank of America above guideline with $76 billion or 4.49% at 3/31/09

$34 billion additional common capital would add 200 bps to current Tier 1 common

New requirements to hold sufficient cushion to absorb additional losses, as determinedby stress testing results performed by regulatory supervisors

Tier 1 capital more than sufficient to absorb stress test results

Tier 1 capital structure must shift toward more common to accommodate Tier 1 commonguideline

Tier 1 common is defined as total Tier 1 capital less preferred stock ($73 billion) andother regulatory defined preferred forms of capital ($22 billion)

Regulatory capital deducts, among other things, goodwill and certain intangiblesand does not consider the impact of FAS115 (OCI)

Results of regulatory stress testing show a shortfall in Tier 1 common capital over a two-year period (2009-2010) of $34 billion


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Federal Reserve Disclosure on SCAP


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BAC 1Q09 P osition vs. SCAP Findings

($ in billions)BAC 1Q09

Tier 1 Common ratio 4.49% 4.00% must remain above in adverse scenario

Pre-tax pre-provision earnings 19.1$ 9.3$ SCAP run rate includes reserve build

Net charge-offs 6.9$ 11.4$ Avg qtrly rate 2009-2010

Highlights of Loss assumptionsNon-credit Losses

Trading (1.7)$ (24.1)$Debt and equity securities (0.9) (8.5)

Total non-credit losses (2.6)$ (32.6)$

Credit Loss rates

Core residential mortgage portfolio 1.30% 2.85% Fed assumption halved for comparison

(adj.for SOP-03-3 portolio, Merrill)Commercial and Commercial R/E 1.68% 3.67% Fed assumption halved for comparison

SCAP Results


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Examples of differing loss methodology:Mortgage

The inferred FRB 2-year loss rate on BACs Core Mortgage Portfolio is 5.7%, or 2.85% per annum(adjusting out purchase accounting and excluding Countrywide Impaired, Merrill andWarehouse/Pipeline).

That compares to actual first quarter annualized loss rate on the equivalent portfolio of 1.30%. So, lossrates would have to more than double to 3.1% and remain there for the remaining 7 quarters to reachthe FRBs projections.

Commercial & Commercial Real Estate

The inferred FRB 2-year loss rate on commercial and commercial real estate loans is 7.4%, or 3.7%per annum.

BACs actual first quarter annualized loss rate on the equivalent portfolio was 1.68% . So, loss rateswould have to more than double to 3.9% and remain there for the remaining 7 quarters to reach theFRBs projections.

Additionally, the FRBs loss rate is well above the combined commercial and commercial real estatepeak loss rate experienced by BAC in both the 1991 recession and the 2002 recession.

Debt and Equity Securities

The FRB projected higher depreciation and forced liquidation of debt and equity securities, contrary to

our experience in the current recessionary environment

Highlights of SCAP Findings


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SCAP I mplications

Bank of America is deemed to need an additional $34 billion Tier 1common capital

By June 8, 2009 Bank of America must submit a plan to meet the capitalshortfall

Plan will include common issuances, asset sales, asset reductionsand other items

Capital actions must be completed by November 9, 2009


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Asset W rap Guarantee

Bank of America in discussions to terminate and abandon the previouslyplanned asset wrap offered by the government

A termination of the agreement would reduce planned premium costs

of $4 billion (preferred issuance) and $320 million dividends annually


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Capital Raising to Build Tier 1 Common

Common equity raise of roughly $17 billion

Performed through a combination of an ATM (At-the-Market) issuance programas well as an offering to exchange preferred to common with institutionalinvestors

Executed by Banc of America Securities Merrill Lynch

Preferred exchange to be executed at less than par

Bank of America has filed a registration statement (including a prospectus) with the SEC for the offering to which thiscommunication relates. Before you invest, you should read the prospectus in that registration statement and otherdocuments the company has filed with the SEC for more complete information about the company and this offering.You may obtain these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov .

Alternatively, Bank of America Corporation or the sales agents will arrange to send you the prospectus if you request itby contacting Bank of America Corporation, Corporate Treasury - Securities Administration, at 1-704-386-5681, Banc ofAmerica Securities LLC, toll free at 1-800-294-1322 or Merrill Lynch & Co., toll free at 1-866-500-5408.
http://www.sec.gov/http://www.sec.gov/


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Other Capital P lanning to Build Tier 1 Common

Asset / business sales generating Tier 1 common of around $10 billion

Examples include First Republic, Columbia Management, joint venture

arrangements and various others

Other improvements to pre-tax pre-provision earnings expected during 2Q and 3Q,

and various other items totaling roughly $7 billion


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The Worlds P remier Financial I nstitution

An Unparalleled Franchise Largest retail bank in the U.S., serving one in two households a trillion dollar deposit base Largest commercial bank in the U.S., serving one-third of companies with revenues from $2.5MM to $2B Relationships with 99 percent of U.S. Fortune 500 companies

Leading market share in mortgages Leading market share in credit cards One of the largest global wealth management platforms with approximately 18,000 financial advisors Leading positions in debt and equity underwriting Scale in trading and derivatives businesses in equities, fixed income, and commodities in every major market

and currency in the world

Outstanding cross-selling potential across client base Management team focused on capitalizing on opportunities

Outstanding partnership of legacy BAC and top-flight talent from acquired firms Risk Management learnings immense from recent crisis Cost synergies from mergers identified and ahead of schedule

Firmly believe the company will grow and thrive as we help businesses and individuals work through therecession

Capital strength and ample liquidity 3/31/09 Tier 1 capital of 10.1% Earnings capacity and diversity will aid in building capital Very strong liquidity profile

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U d di Ti 1 C C i l


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Understanding Tier 1 Common CapitalCalculation 3/ 31/ 09

($ in millions) Primary differences between GAAP and regulatory capital

Total Equity 239,549$ 239,549$Common 166,272 Preferred 73,277 Goodwill 86,910 Intangibles (excl MSR) 13,703 Related deferred tax liabilities 3,958

Regulatory capital includes :Total Assets 2,321,963 Trust originated preferred securities 19,721 Capital ratios Minority interest in equity of consol. Subs. 1,919 Total equity / assets 10.32% Regulatory capital excludes :Common equity / assets 7.16% Other comprehensive income FAS115/133/158 (10,528)

Change in FVO due to company's creditworthiness 1,449 Tang equity / assets 6.42% Goodwill 86,910 Tang common equity / assets 3.13% Certain Intangible assets 5,932

Other exclusions 6,365 Regulatory measures Tier 1 Capital 171,061$ 171,061$Less:

Preferred stock 73,277 Minority interest in equity ofconsolidated subs 1,919 Trust originated preferred securities 19,721

Tier 1 Common 76,144

Risk-weighted assets 1,695,192

Tier 1 Ratio 10.09%Tier 1 "common" ratio 4.49%


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bac stress testing results_final

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